Provided By Shelley Dudley
Members of the military and certain other federal employees serving outside the U.S. have an extra year to buy a principal residence in the U.S. and qualify for the credit. Thus, an eligible taxpayer must buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2011. If a binding contract is entered into by that date, the taxpayer has until June 30, 2011, to close on the purchase. Members of the uniformed services, members of the Foreign Service and employees of the intelligence community are eligible for this special rule. It applies to any individual (and, if married, the individual's spouse) who serves on qualified official extended duty service outside of the United States for at least 90 days during the period beginning after Dec. 31, 2008, and ending before May 1, 2010.
In many cases, the credit repayment (recapture) requirement is waived for members of the uniformed services, members of the Foreign Service and employees of the intelligence community. This relief applies where a home is sold or stops being the taxpayer's principal residence after Dec. 31, 2008, in connection with government orders received by the individual (or the individual's spouse) for qualified official extended duty service. The credit is still allowable even if this happens during the year of purchase. Qualified official extended duty is any period of extended duty while serving at a place of duty at least 50 miles away from the taxpayer's principal residence (whether inside or outside the U.S.) or while residing under government orders in government quarters. Extended duty is defined as any period of duty pursuant to a call or order to such duty for a period in excess of 90 days or for an indefinite period.
Only one spouse must be overseas on official extended duty for the requisite amount of time for either spouse to be eligible for the 2011 extension of time to purchase a principal residence and claim the credit.
For more information on this topic, please give us a call at 972-772-7000 or email us at rockwall@kw.com.
Showing posts with label tax credits. Show all posts
Showing posts with label tax credits. Show all posts
Friday, August 20, 2010
Friday, March 12, 2010
4 Homebuyer Tax Credit Tips
Source: http://www.bankrate.com/
By Marcie Geffner
The credit is reasonably straightforward, but there are some tips for those who want to take advantage of it. Here's what you should know:
1. Deadline: April 30, 2010
The most important tip is to be aware of the deadline. Buyers who want to use the tax credit must have their new home under contract (i.e., in escrow) by April 30, 2010, and must close the transaction within 60 days after that date.
That deadline is much sooner than it may seem: Many buyers take months to locate a house, and closing a transaction typically takes 45 to 60 days.
First-time buyers should get started soon because they may face a lot of competition from other buyers who also want to purchase a moderately priced home, according to Ann Pettijohn, a broker and owner of Oaktree Realtors in Orange, Calif. That price range is "very popular" and those homes tend to sell more quickly than higher-priced homes, she says.
Buyers who wait until 2010 may also find fewer homes on the market from which to choose, according to Allyson Bernard, broker and owner of Real Estate Professionals of Connecticut.
"Smart buyers will be out during the holidays when other people are preoccupied," she says.
The short deadline may create even more of a crunch for homeowners who need to sell their current home and purchase a new one, Pettijohn says. Sellers need to be realistic about the value of their current home and put their home on the market as soon as possible, so they'll feel confident about buying their next home, she says.
Buyers who get behind the curveball shouldn't count on another extension to keep them in the game since Sen. Johnny Isakson, R-Ga., a former Realtor and the principal supporter of the legislation that extended and expanded the credit, has said in a statement that the tax credit won't be extended again.
2. Credit up to $8,000 or $6,500
Buyers also need to understand that the tax credit is equal to 10 percent of the sale price of the home, which could be less than the maximum of up to $8,000 for first-time buyers and up to $6,500 for repeat homeowners.
For example, if a first-time buyer purchased a small condominium that cost just $70,000, the tax credit would be $7,000. And by the way, if the home costs more than $800,000, the credit now drops to zero.
3. Get good advice
Homebuyers who want to take advantage of the tax credit should consult the right people for help, including:
4. Beware of tax fraud
According to Patti Ketcham, broker and owner of Ketcham Realty Group in Tallahassee, Fla., homebuyers should educate themselves about the tax credit and learn the lingo.
"It is critical that buyers educate themselves and that they not fall for the slick smoke and mirrors," she says. "Anytime you have found money, it brings out all the rats."
Three Web sites that may be helpful are:
Buyers and sellers should be wary of any advice that sounds suspicious or overly complicated, Ketcham says. For instance, buyers who are told to conceal any information from their lender should "get away" from whoever offered that advice, she says.
One final tip: The IRS has found such a high incidence of fraud and creative tax accounting associated with the homebuyer tax credit that taxpayers who take the credit will now be required to attach a copy of the settlement statement to their federal tax return as proof of purchase. Buyers should keep their paperwork handy.
By Marcie Geffner
The new-and-improved federal homebuyer tax credit can benefit not only first-time homebuyers but also homeowners who want to sell their current home and buy a new one.
The credit is reasonably straightforward, but there are some tips for those who want to take advantage of it. Here's what you should know:
1. Deadline: April 30, 2010
The most important tip is to be aware of the deadline. Buyers who want to use the tax credit must have their new home under contract (i.e., in escrow) by April 30, 2010, and must close the transaction within 60 days after that date.
That deadline is much sooner than it may seem: Many buyers take months to locate a house, and closing a transaction typically takes 45 to 60 days.
First-time buyers should get started soon because they may face a lot of competition from other buyers who also want to purchase a moderately priced home, according to Ann Pettijohn, a broker and owner of Oaktree Realtors in Orange, Calif. That price range is "very popular" and those homes tend to sell more quickly than higher-priced homes, she says.
Buyers who wait until 2010 may also find fewer homes on the market from which to choose, according to Allyson Bernard, broker and owner of Real Estate Professionals of Connecticut.
"Smart buyers will be out during the holidays when other people are preoccupied," she says.
The short deadline may create even more of a crunch for homeowners who need to sell their current home and purchase a new one, Pettijohn says. Sellers need to be realistic about the value of their current home and put their home on the market as soon as possible, so they'll feel confident about buying their next home, she says.
Buyers who get behind the curveball shouldn't count on another extension to keep them in the game since Sen. Johnny Isakson, R-Ga., a former Realtor and the principal supporter of the legislation that extended and expanded the credit, has said in a statement that the tax credit won't be extended again.
2. Credit up to $8,000 or $6,500
Buyers also need to understand that the tax credit is equal to 10 percent of the sale price of the home, which could be less than the maximum of up to $8,000 for first-time buyers and up to $6,500 for repeat homeowners.
For example, if a first-time buyer purchased a small condominium that cost just $70,000, the tax credit would be $7,000. And by the way, if the home costs more than $800,000, the credit now drops to zero.
3. Get good advice
Homebuyers who want to take advantage of the tax credit should consult the right people for help, including:
- A tax preparer, who can help them ensure they meet all the requirements to use the credit.
- A mortgage lender, who can help them choose a loan program that will fit their needs.
- A Realtor®, who can help them locate a home they can afford and want to purchase.
4. Beware of tax fraud
According to Patti Ketcham, broker and owner of Ketcham Realty Group in Tallahassee, Fla., homebuyers should educate themselves about the tax credit and learn the lingo.
"It is critical that buyers educate themselves and that they not fall for the slick smoke and mirrors," she says. "Anytime you have found money, it brings out all the rats."
Three Web sites that may be helpful are:
Buyers and sellers should be wary of any advice that sounds suspicious or overly complicated, Ketcham says. For instance, buyers who are told to conceal any information from their lender should "get away" from whoever offered that advice, she says.
One final tip: The IRS has found such a high incidence of fraud and creative tax accounting associated with the homebuyer tax credit that taxpayers who take the credit will now be required to attach a copy of the settlement statement to their federal tax return as proof of purchase. Buyers should keep their paperwork handy.
Wednesday, October 28, 2009
TAX CREDIT EXPIRES SOON
HOUSTON (Houston Chronicle) – The window for first-time homebuyers to take advantage of the $8,000 federal tax credit will close at the end of November.
To qualify for the credit, any transaction involving a first-time buyer must close before midnight on Nov. 30, 2009.
Tax credit guidelines are discussed in the Houston Chronicle and in past issues of RECON.
To qualify for the credit, any transaction involving a first-time buyer must close before midnight on Nov. 30, 2009.
Tax credit guidelines are discussed in the Houston Chronicle and in past issues of RECON.
Thursday, June 4, 2009
It May Be Time to Think About Buying a House
By RON LIEBER
Published: December 5, 2008 in the NY Times
Published: December 5, 2008 in the NY Times
Five or 10 years from now, when the financial crisis has ended and housing prices are up smartly once more, we will look in the rearview mirror and realize that we missed a golden age for first-time home buyers.
Then, everyone who sat on their down payment savings accounts for a few years too long will kick themselves for not taking advantage of what may turn out to be the buying opportunity of a lifetime for those who can qualify for a mortgage.
Unfortunately, we do not know when this golden age will begin, because we will be able to identify a bottom to the housing market only with the benefit of hindsight. But as it does with the stock market, the moment will probably arrive when everyone is feeling the most pessimistic.
That moment is certainly getting closer. Housing prices have fallen drastically from their peak levels in many areas of the country. Rates on 30-year fixed-rate mortgages are already close to 5.5 percent, and this week there were suggestions that the federal government might try to drive them down to 4.5 percent, a truly incredible figure to be able to lock in for three decades.
Meanwhile, first-time home buyers have the same advantage they have always had, which is that they do not have to sell their old place before buying a new one. That is an added advantage in areas where many available houses simply are not moving, because the people trying to sell them will not be bidding against you.
If you’re hoping for a recovery in the housing market, you ought to be cheering on the first-time home buyers. When they purchase homes, their sellers are free to move on or move up, stimulating further sales.
But if you are a potential first-time buyer yourself, or lending or giving the down payment to one, you are probably as frightened as you are tempted by all the “For Sale” signs that have become “On Sale” signs. So let’s quickly review some of the still-grim pricing data in certain areas — and consider the reasoning offered up by first-time buyers who have forged ahead anyhow.
As is always the case with real estate, much depends on location. One study, “The Changing Prospects for Building Home Equity,” tries to predict where today’s first-time buyers in the 100 biggest metropolitan areas may actually have less home equity by 2012 as a result of continued price declines. The verdict was that buyers in 33 of the markets could see a decline by 2012, including potential six-figure drops on an average home in the New York City, Los Angeles, San Francisco and Seattle metropolitan areas.
This is obviously scary. (I’ve linked to the study, a joint effort of the Center for Economic and Policy Research and the National Low Income Housing Coalition, from the version of this article at nytimes.com/yourmoney.) It’s worth noting, however, that these predictions came before the government made its most recent move to reduce borrowing costs.
Also, the price projections in the study are based, in part, on the fact that the ratio of purchase prices to annual rents is still higher in many areas than the historical average, which is roughly 15 times rents. While past figures may well have some predictive value, I have never been convinced that first-time buyers compare a home that they could own and one that they would rent in purely or even primarily economic terms.
When Jaime and Michael Proman moved this fall to Minneapolis, his hometown, from New York City, they craved a different sort of life after two years together in a 450-square-foot studio apartment. “We didn’t want a sterile apartment feel,” said Mr. Proman, who is 28 (his wife is 26). “We wanted something that was permanent and very much a reflection of us.”
The fact is, in many parts of the country there are few if any attractive rentals for people looking to put down roots and enjoy the sort of amenities they may spot on cable television home improvement shows. Comparing a rental with a place that you may own seems almost pointless in these situations, especially for those who are now grown up enough to want to make their own decisions about décor without consulting the landlord.
Still, for anyone feeling the urge to buy, a number of practical considerations have changed in the last year or two. The basics are back, like spending no more than 28 percent of your pretax income on mortgage payments, taxes and insurance. Even if a lender does not hold you to this when you go in for preapproval, you should hold yourself to it.
You will also want to start now on any project to improve your credit score because it may take several months to get it above the 720 level that qualifies you for many of the best mortgage rates.
John Ulzheimer, president of consumer education for credit.com, a consumer credit information and application site, suggests starting to pay down and put away credit cards months before you apply for a loan. That is because the credit scoring system could penalize you if you use a lot of credit each month, even if you always pay in full. Also, check your three credit reports (it’s free) at annualcreditreport.com and dispute errors.
While no one can easily predict the likelihood of losing a job, Friday’s startling unemployment figures suggest the need for caution if you think you might be vulnerable. A. C. Panella, who teaches communications at Pasadena City College in California, waited until she had a tenure-track job before buying a home in the Highland Park section of Los Angeles with her partner, Amy Goldman, a lawyer for a nonprofit organization. “We could afford the mortgage payment on one salary, were something to come up,” Ms. Panella, 31, said. “It’s really about being able to stay within our means.”
For many first-time home buyers, that philosophy stretches to the down payment, too. Ms. Panella and her partner put down 20 percent when they bought their home in September, as did the Promans when they bought their home in the Lowry Hill neighborhood of Minneapolis.
Alison Nowak, 29, put just 3 percent down on a Federal Housing Administration-backed loan last month when she and her partner, Lacey Mamak, bought a $149,900, 800-square-foot home several miles south of where the Promans live. “Anything that is an opportunity also has a bit of risk,” she said. Her house was in foreclosure before a plumber bought it and fixed it up. “One way we mitigated it was that we bought a really tiny house in a very good neighborhood.”
One other strategy might be to buy new instead of used. Ian Shepherdson, chief United States economist for the research firm High Frequency Economics, says he believes that a steep drop-off in inventory of new homes is coming soon, thanks to a rapid decrease in home builder activity.
Since prices generally soften in the winter, it may make sense to start looking seriously once the mercury bottoms out. “If you look at new developments next spring, you may not have the choice you thought you would have or be in the bargaining position you thought you would be,” Mr. Shepherdson said. Also, if you wait after June 30, you will miss out on a $7,500 federal tax credit for income-eligible first-time home buyers that works like an interest-free loan.
Finally, allow yourself to consider how it would feel if you bought and then prices dropped another 10 or 15 percent. It might not bother you if you plan to stick around. Plenty of people seem to be making a longer commitment to their homes. According to a survey that the National Association of Realtors released last month, typical first-time buyers plan to stay in their home 10 years, up from 7 last year.
Perhaps people are more aware that they will not be able to build equity as rapidly as others did in the real estate boom. Or they simply have more confidence in hard, hometown assets now than in other markets.
“We wouldn’t let another decline bother us,” said Michael Proman. “You can never time a bottom. This is a long-term investment for us, and it truly is the best investment we have in our portfolio right now.”
Monday, November 10, 2008
First Time Buyers Tax Credit
The tax credit may be enough of an incentive for potential buyers to jump off the fence. That is, if they know about it.
By Robert Freedman | November 2008
The $7,500 home ownership tax credit that the federal government created earlier this year as part of the Housing and Economic Recovery Act (H.R. 3221) is another tool at your disposal to encourage potential buyers to jump off the fence and get into the real estate market.
When you combine the tax credit with today’s low interest rates, wide selection of for-sale inventory, and affordable home prices, many of the pieces are in place for your customers to buy now. But tax credits can be confusing. To help your clients understand how the credit works and why it would help them, you must learn the details.
Here are 6 things you should be able to explain to prospects and clients:
1. Buyers have until July 2009 to make a purchase that qualifies.
The tax credit was passed in July of this year as part of the Housing and Economic Recovery Act (H.R. 3221). It’s worth up to $7,500 and can be taken in a single tax year. Authorization for the credit ends July 1, 2009, so if your customers wait to buy in the first half of 2009 they can take the credit on their 2009 tax return. Taxpayers can take the credit on their 2008 tax return if they bought their house this year after April 9.
2. Buyers don't really have to be "first-timers."
The tax credit is actually available to any individual or household that hasn’t owned a home for at least three years. And the NATIONAL ASSOCIATION OF REALTORS® has asked Congress to expand the credit to all buyers, not just those who haven't owned a primary residence in recent years.
3. Even if buyers exceed the income limit, they can benefit from the credit.
The actual credit amount is set as a percentage of the home purchase amount. That percentage amount is 10 percent, so your customers can get 10 percent of the home price credited against their tax liability, up to a maximum $7,500. Sounds like a great deal. But what if your clients make more money than the income limit of $75,000 for individuals and $150,000 for households? Good news: Individuals whose income exceeds the $75,000 limit but don't make more than $95,000 can still take the credit but on a reduced basis. The same thing applies to households earning up to $170,000. By the way, any house is eligible as long as it’s a primary residence and is in the United States.
4. Think of it as an interest-free loan.
The federal government requires the tax credit to be paid back in small, 6.67-percent increments over 15 years, although repayment will be no more than $500 yearly and payments will not start until 2011. For that reason, some analysts have likened the credit to a 15-year, interest-free loan to help make home buying affordable. NAR is pushing congress to remove the repayment provision, making this tax credit a true tax credit rather than an interest-free loan.
5. You don't have to be authorized before making a home purchase.
There is no pre-purchase authorization, application, or other approval process. Eligible buyers simply have to claim the credit on their IRS Form 1040 tax return and/or any form that the IRS might devise.
6. New-home construction qualifies.
For a home that a buyer constructs, the purchase date is the first date the buyer occupies the home.However, any home that is not a primary residence, such as a vacation home or income property, does not qualify.
NAR Asking Congress to Expand Credit
As mentioned above, NAR has asked Congress to do away with the repayment provision of the first-time buyer tax credit and expand the credit to all home buyers, not just first-timers. The proposals were part of a four-point housing stimulus plan the association submitted in mid-October.
“Housing has always lifted the economy out of downturns, and it is imperative to get the housing market moving forward as quickly as possible,” said NAR President Richard F. Gaylord. “It is vital to the economy that Congress take specific actions to boost the confidence of potential homebuyers in the housing market and make it easier for qualified buyers to get safe and affordable mortgage loans.
Article courtesy of Realtor Magazine
By Robert Freedman | November 2008
The $7,500 home ownership tax credit that the federal government created earlier this year as part of the Housing and Economic Recovery Act (H.R. 3221) is another tool at your disposal to encourage potential buyers to jump off the fence and get into the real estate market.
When you combine the tax credit with today’s low interest rates, wide selection of for-sale inventory, and affordable home prices, many of the pieces are in place for your customers to buy now. But tax credits can be confusing. To help your clients understand how the credit works and why it would help them, you must learn the details.
Here are 6 things you should be able to explain to prospects and clients:
1. Buyers have until July 2009 to make a purchase that qualifies.
The tax credit was passed in July of this year as part of the Housing and Economic Recovery Act (H.R. 3221). It’s worth up to $7,500 and can be taken in a single tax year. Authorization for the credit ends July 1, 2009, so if your customers wait to buy in the first half of 2009 they can take the credit on their 2009 tax return. Taxpayers can take the credit on their 2008 tax return if they bought their house this year after April 9.
2. Buyers don't really have to be "first-timers."
The tax credit is actually available to any individual or household that hasn’t owned a home for at least three years. And the NATIONAL ASSOCIATION OF REALTORS® has asked Congress to expand the credit to all buyers, not just those who haven't owned a primary residence in recent years.
3. Even if buyers exceed the income limit, they can benefit from the credit.
The actual credit amount is set as a percentage of the home purchase amount. That percentage amount is 10 percent, so your customers can get 10 percent of the home price credited against their tax liability, up to a maximum $7,500. Sounds like a great deal. But what if your clients make more money than the income limit of $75,000 for individuals and $150,000 for households? Good news: Individuals whose income exceeds the $75,000 limit but don't make more than $95,000 can still take the credit but on a reduced basis. The same thing applies to households earning up to $170,000. By the way, any house is eligible as long as it’s a primary residence and is in the United States.
4. Think of it as an interest-free loan.
The federal government requires the tax credit to be paid back in small, 6.67-percent increments over 15 years, although repayment will be no more than $500 yearly and payments will not start until 2011. For that reason, some analysts have likened the credit to a 15-year, interest-free loan to help make home buying affordable. NAR is pushing congress to remove the repayment provision, making this tax credit a true tax credit rather than an interest-free loan.
5. You don't have to be authorized before making a home purchase.
There is no pre-purchase authorization, application, or other approval process. Eligible buyers simply have to claim the credit on their IRS Form 1040 tax return and/or any form that the IRS might devise.
6. New-home construction qualifies.
For a home that a buyer constructs, the purchase date is the first date the buyer occupies the home.However, any home that is not a primary residence, such as a vacation home or income property, does not qualify.
NAR Asking Congress to Expand Credit
As mentioned above, NAR has asked Congress to do away with the repayment provision of the first-time buyer tax credit and expand the credit to all home buyers, not just first-timers. The proposals were part of a four-point housing stimulus plan the association submitted in mid-October.
“Housing has always lifted the economy out of downturns, and it is imperative to get the housing market moving forward as quickly as possible,” said NAR President Richard F. Gaylord. “It is vital to the economy that Congress take specific actions to boost the confidence of potential homebuyers in the housing market and make it easier for qualified buyers to get safe and affordable mortgage loans.
Article courtesy of Realtor Magazine
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